Creating global ‘K-liquor’? Think again

Now we must break away from the time when alcohol is regulated by high taxes and restrictions on distribution.

Kim Tae-kyung

The author is CEO of Amazing Brewing Company. According to the National Tax Service, liquor imports amounted to 1.7 trillion won ($1.3 billion) last year while exports were 397.9 billion won. Imports are about 4.3 times larger. As the trade deficit grows year by year, liquor industry has become a trade deficit industry.

On the other hand, Scotland’s whiskey exports in 2022 were 6.2 billion pounds ($7.7 billion or 10.4 trillion won). It is larger than the Korean liquor retail market estimated to be about 10 trillion won. Scotland, with a population of 5 million, earns the equivalent of the entire liquor retail market of Korea, which has a population of 10 times, only from whiskey exports every year.

Korea consumes about 9.57 liters of alcohol per person per year, ranked at 20th worldwide (2021 World Health Organization statistics). As alcohol consumption is affected by culture and climate, it cannot be said collectively. But compared to neighbors like Japan and China — each drinking 7.26 liters and 6.7 liters per person per year, respectively — Koreans are considered to be drinking a bit more than the neighbors.

While alcohol consumption is high, Korea does not have a globally recognized alcohol brand. On the other hand, as of March 2023, the market cap of the company that produces Maotai — a baiju brand considered to be the best in China — is about 420 trillion won. It is slightly higher than Samsung Electronics’ corporate value.

Korea has mainly regulated alcohol consumption by increasing the liquor tax, which is one of the highest in the world. Therefore, Korean companies focused on making inexpensive alcohol. As the alcohol industry has grown mainly with cheap soju and beer, upgrading efforts were lacking. The government attributed it to a lack of diversity and believed that increasing diversity would bring improvement.

It was craft beer that brought a breakthrough. The famous British media article which wrote that beer is the only product South Korea objectively makes worse than North Korea also played a part. As the government lifted various regulations, a variety of craft beers were introduced from around 2015. As a result, the beer industry has been equipped with variety. But craft beer still accounts for about 3 percent of the entire beer industry. As its main sale channels are supermarkets and convenience stores, only about 10 companies which can afford to invest in canning facilities can display their beers at such outlets even while there are more than 150 craft beer makers nationwide.

Meanwhile, new hope has sprung up as online sales of traditional liquor have been allowed since 2018. But the term “traditional liquor” is confusing. Even a soju brand made by a foreigner can qualify as a traditional liquor if it uses 100 percent raw ingredients from Korea. But if one percent of raw ingredients contains imports, it is not considered a traditional liquor — even if it is made by a company that employs as many Koreans as possible. Nevertheless, thanks to the permit for online sales, the traditional liquor industry grew fast, mainly online, even though it had to use limited raw ingredients.

Then came the turnaround. During the prolonged Covid-19 pandemic, the young generation changed the axis of consumption to wine and whiskey that could match their tastes as they drank at home and alone.

Of course, there are Koreans who are serious about making alcoholic beverages. In addition to craft beer and traditional liquor, more and more people are starting their own businesses in the whiskey and gin fields with entrepreneurial spirit. The problem is the sales channel again: the high-quality alcohol they produce has limited outlets for sales.

In Japan and China, online liquor sales are legal. In the United States, it is allowed in some states. Then, why is it illegal in Korea? The Ministry of Gender Equality and Family is concerned about the risk of underage drinking, while the Ministry of Health is worried about health of the people. The Ministry of Agriculture, Food and Rural Affairs opposes online sales out of fear that the fledgling online sales of “traditional liquor” may suffer. Adding the vested interests of liquor wholesalers, no way can be found. As seen in the disputes between taxi drivers and Tada service, the government often sides with the interest group when a powerful interest group protests.

The alcohol industry needs to be nurtured in Korea.

The government recently announced that it will work to create world-class “K-liquor.” Now we must break away from the time when alcohol is regulated by high taxes and restrictions on distribution. Don’t we need a change of mindset to encourage drinking good liquor even if you drink just one glass?

Translation by the Korea JoongAng Daily staff.